Spending review: Osborne delivers 17% cut to BIS budget

George Osborne has announced a 17 per cent cut in the Department for Business, Innovation and Skills’ budget in the spending review.

The move will see cuts to student opportunity funding for the poorest students and will mean existing students and graduates who took out loans since 2012 will be asked to pay more, via a freeze to the repayment threshold.

The chancellor said there would also be “real-terms protection” for the science budget, although this will also have to cover a new Global Challenges Fund that currently sits within the Department for International Development.

The headline BIS cut – which is less than had been anticipated – will see its total budget, resource and capital, decline from £16.6 billion this year to £13.2 billion in 2019-20.

The spending review document says that total science funding “will be over £500 million higher by the end of the Parliament compared to 2015-16. This will include a £1.5 billion new Global Challenges Fund.”

The government will “provide new financial support through maintenance loans for part-time HE students, tuition fee loans for higher level skills in Further Education and new loans for postgraduate Master’s degrees, reaching £1 billion in 2019-20 and benefiting around 250,000 students”. It also announced that tuition fee loans would be made available to students taking a second degree, but only in science, technology, engineering and maths subjects.

Teaching grant, currently about £1.4 billion, will be cut “by £120 million in cash terms by 2019-20”. High-cost subject funding will be protected in real terms.

Student opportunity funding, for the poorest and disabled students, worth around £380 million, will be cut. The government says it will “work with the Director of Fair Access to ensure universities take more responsibility for widening access and social mobility, and ask the Higher Education Funding Council for England to retarget and reduce the student opportunity fund, focusing funding on institutions with the most effective outcomes”. The government will “also make savings in other areas of the teaching grant”.

The decision to scrap student maintenance grants and replace them with loans is counted as a spending review saving and will “save over £2 billion a year by 2019-20”.

Current students and graduates who took out loans since 2012 will be asked to pay more in repayments. “To reduce government debt, the student loan repayment threshold for Plan 2 borrowers will be frozen until April 2021,” the government says. This implements a controversial proposal that the government recently finished consulting on.

Martin Lewis, founder of the Money Saving Expert website, furiously attacked Mr Osborne over the “retrospective hike”.

Mr Lewis chaired the Independent Taskforce on Student Finance Information, which was established in 2011 with government support as ministers tried to ensure that students were not deterred from applying to university by the £9,000 fee regime. When the government was consulting on its plans to make the change, Mr Lewis told Times Higher Education that he would not be a “mule” for government “mis-selling” of loans.

The change was disclosed in the spending review document, but not mentioned by Mr Osborne in his speech. Mr Lewis tweeted Mr Osborne directly to ask: “Why didn’t you have the balls to announce your retrospective hike to student loans in the statement? Why hide it?”

Meanwhile, the government will also take steps to lower the write-off rate on student loans. “The discount rate applied to student loans will be revised to 0.7% above RPI, to bring it into line with the government’s long-term cost of borrowing,” the spending review document says. “Taken together, this will reduce the government’s estimate of the long-term student loans subsidy to around 30%.”

On postgraduate loans, the government says it will “lift the age cap for new postgraduate loans, so they are available to all those under 60, and reduce the repayment rate from 9% to 6% of income over £21,000. Loans will be introduced from 2016-17.”

john.morgan@tesglobal.com